Metro , BC Industrial Overview Fall 2019

Multiple economic regional Overview Edmonton, $10.73 psf in Ottawa and $10.49 etro Vancouver’s industrial market psf in Regina. Toronto’s average asking net factors powering Metro Mremains one of the strongest in North rental rate of $8.95 psf is among the lowest America thanks to ongoing strong demand in Canada. Vancouver’s industrial among users and both private and institu- The city of Vancouver’s average industrial tional investors, which is driving rapid rental asking net rental rate ($18.14 psf) in the third market to record heights rate growth, supporting premium pricing for quarter of 2019 was the highest in Metro industrial assets as well as record low vacan- Vancouver, followed by North Vancouver cy and elevated levels of new construction ($15.93 psf) and Coquitlam ($13.88 psf). For activity in 2019. the first time in Metro Vancouver’s history, Industrial vacancy in Metro Vancouver’s the average asking net rental rate for indus- 206.8-million-square-foot (msf) market in the trial space surpassed $10 psf in all municipali- third quarter of 2019 was 1.3%, the second ties throughout the region. lowest in Canada after Toronto, which post- Metro Vancouver’s regional industrial market ed a vacancy rate of 0.7%. Industrial vacancy is being powered by four key engines of de- in Ottawa was the third lowest in Canada at mand and growth (along with other factors 1.8%. Average asking net rental rates for in- outside the region). dustrial space is the highest in Vancouver at continued on back page $12.67 psf, compared with $10.75 psf in

Metro Vancouver’s industrial Strata projects are becoming the dominant All municipalities recorded an average asking net rental vacancy second-lowest in form of new industrial development in Metro rate for industrial space in excess of $10 psf for the first Canada at 1.3% Vancouver due to the high prices achieveable time in Metro Vancouver history

Delivery of significant new supply not Lease rates at record highs as Metro Stacked industrial development increasingly being impacting vacancy as most is preleased Vancouver average surpasses $12.65 psf considered by major developers in Metro Vancouver due in 2019/20 to high land costs and a limited industrial land supply

Partnership. Performance avisonyoung.com Metro Vancouver Industrial Market Update (Q3 2019)

Average industrial lease rates in Metro Vancouver (PSF) Approximately, 1.8 million sf of

MARINE DR new inventory will be delivered

MARINE DR in the next six months, but 3 ST W MT SEYMOUR PKWY NORTHKEITH RDVANCOUVER E DOLLARTON HWY 3 ST$15.93 E 58% of that space is already

W GEORGIA ST COAST MERIDIAN RD MERIDIAN COAST BARNET HWY preleased/ presold.

E HASTINGS ST ST RENFREW

WILLINGDON AVE HASTINGS ST

CLARK DR CLARK PINETREE WAY ST JOHNS ST

MCNEIL RD NEAVESRD W 4 AVE LOUGHEED HWY CLARKE RD W COMO LAKE AVE

KINGSWAY NANAIMO ST E BROADWAY W 16 AVE ST RUPERT GAGLARDI WAY PORT COQUITLAM

SW MARINE DR W KING EDWARD AVE LOUGHEED HWY AUSTIN AVE BOUNDARY RD KNIGHT ST $13.76 MUNICIPALITY INVENTORY Q3 VACANCY

S

E COLUMBIA ST COQUITLAM S A MAPLEABERNETHY RIDGE WAY W 41Vancouver AVE W 41 AVE P CANADA WAY B Y KINGSWAY ILL H Richmond 38,148,282 1.5% Y W 49 AVE $13.56 $13.88 MAR $10.29 $18.14 MCBRIDE BLVD IMPERIAL ST DEWDNEY TRUNK RD DEWDNEY TRUNK RD LOUGHEED HWY SE MARINE DR TENTH AVE Surrey 33,192,961 1.3% KNIGHT ST N/AEIGHTH AVE

MARINE WAY 240 ST 272 ST GROSVENOR RD Burnaby 29,068,868 1.2% BYRNE RD BRIDGEPORT RD KING GEORGE BLVD

NO 6 RD 104 AVE 104 AVE 120 ST 156 ST 152 ST Vancouver 24,179,934 3.3% 96 AVE ALDERBRIDGE WAY 96 AVE 96 AVE 96 AVE STAVE ST LAKE 208 ST SOUTH FRASER PERIMETER ROAD YALE RD YALE RD 200 ST WESTMINSTER HWY WESTMINSTER HWY

FRASER HIGHWAY Delta 25,307,214 1.0% RICHMOND 88 AVE 88 AVE 88 AVE 88 AVE TRANS-CANADA HIGHWAY 88 AVE CEDAR ST 200 ST

BLUNDELL RD NORDEL WAY 156 ST 168 ST TRANS-CANADA HIGHWAY SCOTT ROAD 128 ST 132 ST 140 ST $13.29 SURREY 144 ST HARVIE RD NO 1 RD NO 2 RD NO 3 RD NO 4 RD NO 6 RD Langley LOUGHEED HWY 17,386,319 0.8% TRANS-CANADA HIGHWAY 208 ST 152 ST 184 ST

RIVER RD $11.11 KING GEORGE BLVD

FRASER HIGHWAY LICKMAN RD EVANS RD VEDDER RD PREST RD

STEVESTON HWY 72 AVE 72 AVE 72 AVE Coquitlam264 ST 8,210,738 1.0% 168 ST 200 ST

64 AVE 64 AVE 64 AVE 64 AVE 64 AVE 184 ST 120 ST 128 ST 132 ST 144 ST

104 ST Port Coquitlam 7,944,572 0.4% LANGLEY 216 ST 232 ST 58 AVE 56 AVE LANGLEY BYPASS 56 AVE 56 AVE KEITH WILSON RD BELL RD 152 ST

DELTA 248 ST Abbotsford 8,331,740 0.7% TRANS-CANADA HIGHWAY

$12.43 RD BRADNER MT LEHMAN RD RD GLADWIN

FRASER HIGHWAY LADNER TRUNK RD$10.14 200 ST ABBOTSFORD VEDDER MTN RD 208 ST 168 ST 184 ST 216 ST 192 ST BOUNDARY RD North Vancouver 5,340,305 OLD CLAYBURN RD 0.6% ARTHUR DR ARTHUR 152 ST $10.25 DOWNES RD

TRANS-CANADA HIGHWAY 232 ST 248 ST 240 ST 36 AVE 224 ST New Westminster 4,405,187 0.0%

DELTAPORT WAY 32 AVE 32 AVE MACLURE RD 144 ST FRASER HIGHWAY 216 ST 140 ST Maple Ridge/Pitt Meadows 4,427,299 0.3%

BRADNER RD BRADNER SOUTH FRASER WAY 168 ST 184 ST 200 ST CAMPBELL RD

24 AVE 24 AVE 232 ST 24 AVE 24 AVE 192 ST 208 ST 128 ST 152 ST

Tsawwassen (TFN Land) 863,620TRANS-CANADA HIGHWAY 0.0% TFN LANDS 16 AVE 16 AVE 16 AVE 16 AVE 16 AVE WELLS LINE RD 184 ST 200 ST 248 ST $10.95 224 ST 240 ST Metro Vancouver 206,807,039 1.3% 8 AVE 8 AVE HUNTINGDON RD HUNTINGDON RD

4 AVE RECENT NOTABLE INDUSTRIAL LEASE TRANSACTIONS IN METRO VANCOUVER SINCE SPRING 2019 MUNICIPALITY ADDRESS SQUARE FEET TENANT TYPE Delta 1425 Derwent Way 282,526 Veritiv Corp. Renewal Delta 4300 80th Street 234,629 MTU Aero Engines New Vancouver 3200 East Broadway 215,928 CV Logistics Inc. New Abbotsford 3084 Peardonville Road & 2285 Queen Street 179,057 FlexiForce Canada Inc. Renewal Richmond 16131 Blundell Road 178,787 Euro Asia Transload Sublease Langley 27475 58 Crescent 162,000 General Motors Renewal Richmond 1700 No. 6 Road 125,294 Daiso Canada Ltd. New Richmond 12211 Horseshoe Way 106,380 Whites Studios New Surrey 9255 194th Street, Units 11-15 98,307 Metrie Canada Inc. Renewal Delta 7560 Beedie Way 82,740 GoodFood Market Corp. New Port Coquitlam 1610 Industrial Avenue 80,414 CIMS LP Renewal Surrey 19060 33rd Avenue 75,000 Richards Packaging Inc. New Richmond 13201 River Road 72,986 FPS Food Processing Solutions Corp. New Burnaby 7588 Winston Street 66,431 SIM Video International Inc. Renewal Surrey 19060 33rd Avenue 65,000 Access Information Management of Canada ULC New Delta 701 Audley Boulevard 61,800 GPS Logistics & Warehouse Ltd. Renewal Maple Ridge 23282 River Road 61,500 Vista Railing Systems Inc. Renewal Vancouver 901 Great Northern Way 61,000 Tesla Inc. New Vancouver 455 East Kent Avenue North 60,357 Lush Handmade Cosmetics Ltd. Renewal

Sources: Avison Young Research & RealNet

2 Partnership. Performance Fall 2019 Industrial Overview avisonyoung.com

Metro Vancouver Five-Year Industrial Trends

3,000,0003,000,000 $14.00$14.00

$12.00 2,500,0002,500,000 $12.00

$10.00$10.00 2,000,0002,000,000 $8.00$8.00 1,500,0001,500,000 $6.00$6.00 1,000,0001,000,000 $4.00 SQUARE FOOTAGE SQUARE $4.00 SQUARE FOOTAGE

500,000500,000 AVERAGE NET ASKING $PSF $2.00$2.00 AVERAGE NET ASKINGAVERAGE $PSF 0 0 $0.00 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $0.00 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2018 2019 -500,000-500,000 -$2.00-$2.00 2014 2015 2016Absorption New Supply 2017Avrg. $PSF 2018 2019

ABSORPTION NEW SUPPLY AVERAGE ASKING LEASE RATE

NOTABLE INDUSTRIAL INVESTMENT SALES BY PRICE IN METRO VANCOUVER SINCE SPRING 2019

PURCHASE BUILDING (SF)/ ADDRESS VENDOR PURCHASER PPSF PRICE SITE AREA (ACRE) 15050 54A Avenue, Surrey Hydro Quebec CanFirst Capital Management $66,150,000 $210 315,128 / 16.03 18920 36th Avenue, Surrey Garaventa Ltd. PFN Holdings Ltd. $29,000,000 $260 111,374 / 5.15 11511 No. 5 Road, Richmond South Street Developments PIRET / Blackstone Group $21,900,000 $231 95,000 / 3.12 365 Railway Street, Vancouver Danet Interiors Ltd. Allied REIT $18,000,000 $514 35,000 / 0.27 27222 Lougheed Highway, Maple Ridge 642385 B.C. Ltd. Whitewater Concrete $15,000,000 $166 90,435 / 9.32 16160 River Road, Richmond H. Brum Enterprises Ltd. Soka Holdings Ltd. $13,000,000 $359 36,200 / 4.40 10095 & 10097 179th Street, Surrey PD Properties & Rentals Inc. Hall Constructors Corporation $12,550,000 $212 59,265 / 5.73 30722 Marshall Road, #100-124, Abbotsford Teck Construction LLP Global Bolting Systems Ltd. $12,534,830 $246 51,030 / strata 788 Caldew Street, Delta Gilbertson & Page (Canada) Inc. 788 Caldew Holdings Ltd. $12,000,000 $212 56,523 / 2.67 1280 Odlum Drive, Vancouver Robco Construction Ltd. 1111680 B.C. Ltd. $11,688,200 $849 13,772 / 0.44

NOTABLE INDUSTRIAL LAND SALES BY PRICE IN METRO VANCOUVER SINCE SPRING 2019

ADDRESS VENDOR PURCHASER SALE PRICE SITE AREA (ACRES) PRICE/ACRE

18930 & 18970 24th Avenue, Surrey 0711634 B.C. Ltd. PIRET (80%) & 24 Ave GP Ltd. (20%) $44,215,000 19.69 $2,245,328 1168 & 1170 Derwent Way, Delta Supreme Group Beedie $38,150,000 14.82 $2,574,224 6856 152nd Street & 15331 68th Avenue, Surrey Private Individual Conwest Group of Companies $30,000,000 13.22 $2,268,603 10566 Scott Road, Surrey Private Indvidual Vancouver Fraser Port Authority $26,750,000 13.89 $1,925,846 1491 & 1515 Kingsway Avenue, Port Coquitlam Vansea Holdings Ltd. Conwest Group of Companies $22,000,000 9.68 $2,272,727 1154-1156 Kingsway Avenue, Port Coquitlam North Alouette Holdings Ltd. 1134754 B.C. Ltd. $20,650,000 10.35 $1,994,398 9760 190th Street, Surrey Perfect Properties Inc. Beedie $14,500,000 4.88 $2,970,094 309 Kennard Avenue, North Vancouver North Van Plywood Supply Ltd. AAA Self Storage Depot Inc. $12,000,000 1.02 $11,718,750 15600 & 15611 River Road, Richmond Private Individual Canadian National Railway Company $11,000,000 5.67 $1,940,035 19363 32nd Avenue, Surrey QRD (CH193 Holdings) Inc. Sherwood Investments Ltd. $10,618,000 4.94 $2,148,523 Sources: Avison Young Research & RealNet

Partnership. Performance 3

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E-Commerce Vancouver Industrial Team The ongoing transformation of the retail supply chain continues unabated as e-commerce reshapes consumer shopping habits. This is also having several impacts on Metro Vancouver’s Lucy Barton John Lecky industrial market including demand for more traditional large fulfilment centres, a market seg- 604.646.8384 604.647.5061 [email protected] [email protected] ment that is challenged due to a lack (and the high cost) of suitably sized land parcels that can accommodate these large warehouses. The need for smaller last-mile delivery logistics hubs are Kyle Blyth* Joe Lehman also in strong demand in Metro Vancouver, particularly within the inner Metro core of Vancouver, 604.647.5088 604.757.4958

Burnaby and Richmond. Recent substantial leases by e-commerce and logistics/distribution [email protected] [email protected] users have included the likes of Sobeys (530,000 sf), Amazon (453,000 sf ), Walmart (300,000 sf Russ Bougie* Ben Lutes 604.757.5115 604.646.8382 ), The Brick/Leon’s Furniture (430,000 sf), IKEA (330, 540 sf), BMW Canada (280,000 sf ) and Canadian Alliance Terminals (242,460 sf). [email protected] [email protected] Bryn Cartwright Gord Robson 604.647.5093 604.647.1331 A scarcity of industrial sites of scale and the extraordinarily high industrial land costs in these core markets has forced developers to get creative, including development of multi-storey or [email protected] [email protected] Ben Cummings Githa Selamet stacked industrial buildings that can take full advantage of the higher floor space ratios (FSRs) that many sites are now being priced to in order to capture the full value of the property zoning. 604.647.1349 604.647.1345 [email protected] [email protected] E-commerce will remain challenged in Metro Vancouver until new forms of industrial develop- Jennifer Devlin Mathew Sunderland* ment are able to help overcome the challenges that come with a highly constrained industrial 604.757.4950 604.647.1346 land supply. While industrial land costs seem cost prohibitive in a local, regional and national [email protected] [email protected] context, international e-commerce operators understand that Metro Vancouver’s industrial land John Eakin Angus Thiele costs in a global context remain substantially less than many other large cities in Europe, Asia and 604.646.8399 604.646.8386 the United States. [email protected] [email protected] Michael Farrell Terry Thies* Film/TV Production 604.646.8388 604.646.8398 [email protected] [email protected] Metro Vancouver or “Hollywood North” has long hosted a vibrant film and television production Mackenzie Forge Matt Thomas industry and is typically ranked as the third largest film production centre in North America. 604.647.1354 604.646.8383 While historically that industry had been serviced by a number of large studios located largely in [email protected] [email protected] Burnaby, Vancouver and the North Shore, elevated production volumes due in part to the prolif- Rob Gritten Ian Whitchelo* eration of streaming services such as Netflix, Hulu and Amazon Prime Video have exceeded 604.647.5063 604.647.5095 [email protected] [email protected] the capacity of local studios. As a result, production companies frequently began leasing (and re-leasing) warehouse space to use for their projects and were willing to pay higher rents for Megan Hymanyk Garth White* 604.757.5255 604.757.4960 shorter terms. [email protected] [email protected] New studios have opened to meet demand such as the 177,000-sf Ironwood Studios in Kevin Kassautzki Jennifer Williams 604.646.8393 604.757.4955 South Vancouver in 2015 (which was subsequently acquired and renamed Whites Studios [email protected] [email protected] Ironwood), the 75,000-sf Skydance Studios in Surrey in 2016 as well as Martini Film Studios’ Ryan Kerr* Cally Zering initial 150,000-sf facility in Langley in 2017. Despite this new dedicated supply, production com- 604.647.5094 604.757.5116 panies continue to lease and occupy industrial space, particularly in Burnaby and other core [email protected] [email protected] industrial markets. In September 2019, Martini Film Studios proposed a new 600,000-sf facility on 25 acres in Langley, which would make it the largest film and television production studio in * Personal Real Estate Corporation

Canada when completed. Whites Studios also leased 106,380 sf in early 2019 and is now named Whites Studios Copperwood in South Richmond. For more information please contact:

Manufacturing Michael Keenan, Principal & Managing Director Direct Line: 604.647.5081 While traditional manufacturing in Metro Vancouver continues to be displaced further out from [email protected] the core, it remains an integral part of the provincial economy whether drawing on natural re- sources to create forestry, mining and agri-food products to non-resource-based manufacturing Andrew Petrozzi, Principal & Practice Leader, Research (BC) such as shipbuilding and aerospace, as well as clean-tech and life sciences companies. According Direct Line: 604.646.8392 to the provincial government, BC had the fourth fastest-growing manufacturing sector in [email protected] Canada in terms of percentage of GDP between 2013 and 2018. MTU Aero Engines recently leased more than 234,000 sf in Delta, while FlexiForce Canada, the world’s largest manufac- turer of overhead door hardware and accessories, renewed its 178,790-sf lease in Abbotsford. Metrie Canada, a manufacturer and distributor of interior mouldings and doors, renewed in 98,300 sf in Surrey in 2019, while Vista Railing Systems renewed in 61,500 sf in Maple Ridge. Avison Young Manufacturing remains a key component of Metro Vancouver’s industrial market despite reports #2900-1055 W. to the contrary. Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada Port Operations The Port of Vancouver is Canada’s largest port and the most diversified in North America and home to 27 major marine cargo terminals. The port operates across five business sectors: automobiles, breakbulk, bulk, container and cruise. In 2018, 147 million tonnes of cargo moved through the port, valued at $240 billion. Port operations are a defining characteristic of Metro Vancouver’s industrial market with logistics and warehousing playing an outsized role in the con- avisonyoung.com struction, leasing and sale of industrial properties throughout the region. Investment in transpor- tation infrastructure supporting port operations also remains a key driver of industrial activity in © 2019 Avison Young. All rights reserved. the region. Between January 1 and June 30, 2019, overall cargo through the port increased 0.5% E. & O.E.: The information contained herein was obtained from sources to a record 72.5 million metric tonnes over the same time last year, with new mid-year records in that we deem reliable and, while thought to be correct, is not guaranteed by Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young. containers, potash, grain and cruise passengers.